Creating incentives for innovation? The relationship between pay dispersion in R&D groups and firm innovation performance

Innovation is a critical organizational outcome for its potential to generate competitive advantage. While the contribution of knowledge workers to the generation of innovation is widely recognized, little is known about how organizational incentive mechanisms stimulate or inhibit these workers' behaviors that promote innovation. This study examines the relationship between pay dispersion in R&D groups and firm innovation using employee‐level compensation data in US high‐technology firms. The results show that (1) pay dispersion in R&D groups is negatively related to firm innovation and (2) this negative relationship is alleviated in firms with greater financial slack. This study contributes to the innovation literature by illuminating the implications of organizational incentive systems for successful innovation. Copyright © 2013 John Wiley & Sons, Ltd.     

Health Infrastructure, Demographic Transition and Growth

Empirical studies show that the fertility rate (mortality rate) exhibits an inverted u‐shaped dynamic in some countries, while it decreases monotonically in other countries. This paper formulates the concept of public health infrastructure and constructs a growth model that replicates various historically observed patterns of fertility and mortality rates.     

Adoption and Coverage of Performance‐Related Pay during Institutional Change: An Integration of Institutional and Agency Theories

Whether or not to adopt and how extensively to use a newly legitimized practice are discrete decisions made by firms undergoing institutional change. The aim of this paper is to identify the distinct effects of economic, social, and political factors on the adoption of performance‐related pay practices and their coverage (i.e. the proportion of employees covered by the practices) by integrating institutional and agency theories. An empirical analysis is performed with a unique sample of Korean firms that experienced the East Asian financial crisis of 1997. The results show that while performance‐related pay adoption was influenced by economic and social factors, performance‐related pay coverage was related to political factors as well as economic and social factors. This finding suggests that while firms adopt performance‐related pay practices in search of legitimacy, they do not blindly imitate such practices but rather proactively adapt them based on economic efficiency considerations. This study makes valuable contributions to research on institutionalism and remuneration by empirically identifying the conditions under which a pay practice adopted for social legitimacy fits or fails to fit the economic needs of the adopters.     

Minimizing Competition? Entry-Level Compensation in Japanese Firms

This is the first empirical study of the determinants of pay for entry-level jobs among Japanese firms. Pay data of 1,382 companies obtained from the Nikkei survey was matched with company size, performance, industry, and foreign ownership data from Toyo Keizai's Japan Company Handbook. I found that unlike the results based on U.S. data, company size is not related to entry-level pay. Firm performance is positively related, but its effect is minimal. Industry membership and foreign ownership are related. I believe that these findings highlight the influence of the Japanese employment context and information sharing in Japan. Implications for research and practice are discussed.     

Average employee tenure,voluntary turnover ratio,and labour productivity: evidence from Japanese firms

Using Japanese firms' data, this study shows that voluntary turnover ratio is negatively related to firm labour productivity. While recent studies have reported the negative influence of turnover on organizational performance (Kacmar et al., 2006 Kacmar, K.M., Andrews, M.C., van Rooy, D.L., Steilberg, R.C. and Cerrone, S. 2006. Sure Everyone can be Replaced… But at What Cost? Turnover as a Predictor of Unit-Level Performance. Academy of Management Journal, 49: 133–44. [Crossref], [Web of Science ®] , [Google Scholar]; Shaw et al., 2005a Shaw, J.D., Gupta, N. and Delery, J.E. 2005a. Alternative Conceptualizations of the Relationship between Voluntary Turnover and Organizational Performance. Academy of Management Journal, 48: 50–68. [Crossref], [Web of Science ®] , [Google Scholar]), they analysed only US samples. Our study contributes to researchers' efforts to generalize the relationship between voluntary turnover and organizational performance. Turnover is detrimental to labour productivity as it reduces the stock of firm-specific human capital that a firm retains. Findings suggest that firm average employee tenure mediates the relationship between voluntary turnover and labour productivity.     

Increasing the financial integration of U.S. and Japanese markets

The term ‘internationalization of finance’ has been in general use for many years now. The term simply means that the financial systems of various countries have developed relationships that extend across national borders. Another term, ‘globalization of finance’ takes the concept one step further. Generally speaking, there are three reasons behind the steady progress of financial globalization: (1) interest rate deregulation and securitization since the 1970s have proceeded in a similar form in the major countries, which has made financial globalization easier; (2) the increased volume of international capital flows in recent years; (3) the development of telecommunications and computer technology has facilitated the increased international transaction of goods and capital and their settlement using various currencies and 24-hour trading.     

The relationship between production and unemployment in Japan: Okun's law in comparative perspective

This paper studies the question whether the celebrated ‘Okun's law’, a relation between excess capacity and unemployment, applies to the postwar Japanese economy. Though the fitness of estimation is weak, the coefficient that measures the responsiveness of the output gap to the unemployment rate is very large, reaching 28. This large coefficient can be attributed to the elastic response in the female participation ratio, to flexible working hours, to the slow adjustment in employment, and to changes in industrial structures. The results are compared with those in the United States.     

Compensation strategy: does business strategy influence compensation in high‐technology firms?

Drawing on the strategic employee group concept, this study empirically examines whether a firm's innovation strategy influences compensation systems for strategic employee groups in the high‐technology industry. We focus on compensation packages for R&D employees who play a critical role in successful implementations of innovation strategy. Using compensation data for middle‐level managers and professional employees from 237 firms in the high‐technology industry, we found that a firm's strategic intention to pursue innovation has a significant influence on the relative pay level, compensation time horizon, and stock option vesting period lengths of this strategic employee group. Copyright © 2006 John Wiley & Sons, Ltd.